"Despite relatively strong performance for U.S. stocks, institutional investors found their total portfolio performance dampened by a stronger U.S. dollar, hampering the performance of their non-dollar assets, as well as the United Kingdom's vote to leave the European Union in June 2016," said Ned McGuire, managing director and a member of Wilshire's pension risk solutions group, in a news release on the results. "With that, we found that 97% of the plans in this year's study have (a) market value of assets less than pension liabilities, or are underfunded" compared to 94% of plans in 2015.

Over the past decade, city and county pension funds' average allocation to U.S. equity and U.S. fixed income decreased by 14.8 percentage points and 4.8 percentage pints, respectively, while the average allocation to non-U.S. equity and non-U.S. fixed income rose 4.9 percentage points and 50 basis points, respectively. Over the same period, the allocations to real estate and private equity each rose 3.3 percentage points, while other assets (cash and cash equivalents, commodities, hedge funds and other absolute-return strategies) increased 7.6 percentage points.

Reason for the changes, the report cited, were plan executives' desires to reduce home-market bias, increase asset diversification and increase exposure to more leveraged strategies to meet return targets.

Data were analyzed for 107 city and county retirement systems. Of the 107, 106 reported actuarial data on or after June 30, 2016, and the remaining fund reported data on April 30, 2016.